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Understanding the Elements of Cost

A Comprehensive Guide

Introduction

  • Welcome to Education Leaves
  • Exploring the Elements of Cost
  • Cost of a Manufacturer
  • Divided into Three Principal Elements

Element 1: Material Cost

  • Cost of commodities supplied to an undertaking
  • Two types: Direct Material Cost and Indirect Material Cost
  • Direct material represents raw material for production
  • Indirect material necessary for production but not part of the product

Element 2: Labor Cost

  • Cost of salary, wages, bonus, and commission
  • Divided into Direct Labor Cost and Indirect Labor Cost
  • Direct labor directly engaged in production operations
  • Indirect labor supports production operations but not directly involved

Element 3: Expenses

  • Cost of services provided and theoretical cost of asset use
  • Two types: Direct Expenses and Indirect Expenses
  • Direct expenses directly identified with a unit of output
  • Indirect expenses incurred commonly for jobs and processes

Summary and Conclusion

  • Recap the elements of cost: material cost, labor cost, and expenses
  • Highlight the importance of understanding these elements for manufacturers
  • Provide link in description for detailed reading or PDF download
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